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Discovery Leads $40 Million Round for Thrillist Owner Group NineBy
Group Nine building Snapchat studio, creating TV programming
Investment is on top of $100 million in funding last year
Discovery Communications Inc. is increasing its bet on Group Nine Media, leading a $40 million funding round for the holding company of web publishers like Thrillist and NowThis.
Discovery, owner of cable channels like TLC and Animal Planet, already had invested $100 million in Group Nine a year ago. Other participants in the latest funding round were German media giant Axel Springer SE and Lerer Hippeau Ventures.
The cash infusion in Group Nine is a show of confidence in digital media during a painful time of reckoning for the young industry. At least a half dozen online media companies, including Mashable, are weighing whether to sell as Google and Facebook Inc. increasingly dominate digital advertising, making it harder for web publishers to raise new capital. BuzzFeed Inc. and Vice Media Inc. are on track to miss their annual revenue targets this year, according to the Wall Street Journal.
Group Nine Chief Executive Officer Ben Lerer said he saw this dynamic unfolding a few years ago, which is why he combined several millennial-focused online publishers to create Group Nine and teamed up with Discovery. Given the bleak landscape for online media, joining forces with a large media company like Discovery is often the best option, Lerer said.
“Scale is so important right now,” Lerer, who’s also a managing partner at Lerer Hippeau, said in an interview. “There’s not a great place for a solo brand floating in the wind.”
Group Nine is a holding company for Thrillist, which suggests social activities for young men; NowThis, which makes short videos about the news for social media; The Dodo, which is dedicated to animal news; and Seeker, which is aimed at adventurers and explorers.
Lerer declined to disclose Group Nine’s revenue. Discovery CEO David Zaslav said last month the company is unprofitable. Its valuation of about $600 million is little changed from a year ago. The company will benefit when the $70 billion TV advertising market shifts from television to online media, but that evolution “is still in the early innings,” Lerer said.
Traditional media companies are among the few investors still placing bets on digital media. Comcast Corp.’s NBCUniversal has invested $400 million in BuzzFeed. Time Warner Inc.’s Turner division last year led a $45 million investment round for Refinery29.
Both sides stand to benefit from such partnerships. TV networks need online savvy to reach young consumers who don’t subscribe to cable. Web publishers need TV networks to help fund and create professional content so they can win a slice of the lucrative TV ad market.
So far, Discovery is seeing “huge traction” with Group Nine’s audience, Zaslav told Bloomberg TV last month. Group Nine is one of the most eager participants in Facebook’s Watch platform, creating two dozen video series for the service.
“The challenge is it’s not making money yet,” Zaslav said. Discovery is working with Facebook and Snapchat on ways to generate more revenue, he said.
Like other cable channel owners, Discovery is losing subscribers as consumers abandon pay-TV. Discovery’s shares plummeted this month to a seven-year low after the company reported that cord-cutting at its cable networks had accelerated.
Group Nine gives Discovery access to the Snapchat generation. While Discovery aired its annual “Shark Week” in July, the network posted a series of related Snapchat videos made by Group Nine. One video, called “Sharks, They’re Just Not That Into You,” explained how the animals aren’t naturally attracted to humans as prey. Group Nine is now building a Los Angeles studio to create digital programming for Discovery across Facebook, Snapchat and online TV services. It recently acquired Jash, an online comedy producer backed by comedian Sarah Silverman, to bolster its studio business. Group Nine also plans to make television shows for Discovery’s networks.
For advertisers, Group Nine is attractive not just for its younger audience but also for its safe, controversy-free content, like animal videos, says Ben Winkler, chief investment officer at OMD, an ad buyer whose clients include PepsiCo Inc., Nissan Motor Co. and McDonald’s Corp.
“The Dodo is the anti-Vice,” he said, referring to the edgy videos produced by Vice Media. “Clients are looking for feel-good content to associate their brand. It’s hard to go wrong with a baby platypus.”